Did you get a good nights sleep last night! If a 1000 pt down day in the stock market does not rattle you than your ready for trading full time:)
About right now most traders who have not bailed on their positions are at the very least considering bailing out now. They are watching every tick on the 1 min chart, tossing and turning with each move.
If you have position sized accordingly you will, of course, feel some heat, but it will not be anywhere near what you experience if you are oversized in this market. There is no mercy for those that have little or no discipline. You might get away with it for awhile, but eventually, it catches up with you.
Like the poker player that grinds out 50,000 a year playing poker, only to snap in an evening and blow off 30,000 in one nightmare session.
I can tell you when you get on tilt, hands that you never thought about playing are starting to look pretty good:) And for some, at some point the hands mean nothing.
There is an active poker player that plays regularly at the Bellagio who thinks variance is raising every pot and eventually you will catch a run, get ahead and lock it up. Honestly, that is his strategy, although last time I played with him he changed his style up a bit.
This applies to trading also. Whenever the human psyche is in play, strange things can happen.Most humans have little knowledge of what drives them to do what they do and when they do it. To be a seasoned professional you must learn what motivates you and why, regarding your human behavior.
None of us are Vulcans. So we are all susceptible to the pitfalls of having a human mind. We can be as analytical as you like, but at some point, human tendencies are going to creep into the equation.
The best way to handle this is to keep fear and greed out of the equation. The rules you trade by should have very little discretion involved. They should be a flow chart of what to do and when.
Combine this with accurate position sizing and you are on your way to conquering what very few can.
For an excellent movie that goes into the human psyche as it relates to gambling, “The Gambler” with James Caan is by far the best I have seen. As Axle said ” In his world sometimes 2+2=5, That statement sums up perfectly what the human mind can do:)
Now, where was I:) The markets… I have a 125% position in SSO. Typically I do not go over 100%. But on a 1000 pt move down in the dow, I thought it a good time to buy the blood so to speak.
But remember my position sizing is very conservative. My 1/4 units are around 15,000 in SSO. So a 1% move for each unit is only 150.00.
I also have several other mean reversion trades. UPS and NTAP. Both, of course, are underwater and I doubt we will close either at a profit once the exit signal is reached.
Now you’re seeing the downside of mean reversion trading. This is an excellent example of one of the outcomes when you trade mean reversion strategies. The 200 day MA is a good filter to use, but it still does not shelter you from large drawdowns.
We are about an hour before the open and the markets are looking to gap up around .5%. Financials, IBB, are strong and TLT is weak.
This looks to me like a positive bias for the markets.
A 2-year budget bill finally passed but not without some drama which contributed to the sell-off yesterday.
I suspect the President will sign the bill today and that should give a boost to the markets. But I suspect there is more at work with this market sell-off.
Derivative markets were crushed a few days ago and I am not sure the repercussions of that have been fully absorbed. And we have the Russia investigation heating up with accusations flying on both sides. This will just get worse until the entire debacle is finished.
I have made a number of comments regarding this in prior posts. No need to rehash it this morning.
I bought I will be making any new trades this morning. To me, this market looks like it has some more downside before we get a turnaround.I have nothing concrete to make that statement. But I do not think the Fed is inclined to step in as before and announce a loosening!
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
RickJ
RickJ’s Handicapping Picks
rickjshandicappingpicks.com/investing
Skype: riccja
